Canvas Business Model - Literature review Example

Canvas Business Model Affiliation Table of Contents Introduction 2 Osterwalder Canvas Model 3 Key Partners 5 5 Key Activities 6 Value Propositions 8 Customer Relationship 10 10 Customer Segments 11 Key Resources 11 12 Channels 12 Cost Structure 13 13 Revenue Stream 14 Competitive Analysis 15 Conclusion 17 Reference List 19 Introduction Milk is very important for human health because it contains many important nutrients like calcium, vitamins, carbohydrates and proteins. It is considered as a primary source of nutrition for infants and an essential source of nutrition for all human beings. In spite of its huge importance some people can’t take milk due to lactose intolerance (Savaiano, Boushey, & McCabe, 2006). Lactose is a sugar found in milk and some people cannot drink milk because of inability to digest lactose. So it is important to find a substitute through which people can get the essential nutrients which are necessary for their health. After through research it has been identified by scientists that plant/vegan milk is somehow a substitute of cow milk, and people who are allergic to lactose can get benefits from plant milk. (Swallow, 2003). A major challenge for people who are allergic to lactose is learning how to eat and get essential calcium for their body. The disease lactose intolerance is common in adults as well as in some children and runs in families, so it is necessary to find out a substitute product and live a healthy life (Koletzko, et. al. 2012). The business model which has been described in this project represents the idea of plant milk producing company named as Vegan Milk.CO. This is a great idea to introduce a substitute product in the UK market for those people who are allergic to lactose, so in that case the target market of this product is based on the people who want a substitute product of cow milk. Plant milk will be introduced in the market in different flavours with the name of Vegan Milk. Osterwalder Canvas Model Alexander Osterwalder has introduced the concept of canvas business model. The model highlights nine important areas which represents the whole business. These nine blocks are key partners, key activities, value propositions, customer relationships, customer segments, key resources, channels, cost structure, and revenue streams (Osterwalder, 2004) This model provides useful information about the business and its major sectors . The business model of Vegan Milk.CO has been designed by following the pattern of canvas business model introduced by Alexander Osterwalder. Canvas business model is a flexible, simple, and intuitive tool that helps business starters to start their business with great ideas and strategies. This business model provides three very effective benefits that are focus, speed and agility, and common language by providing information about business offering, its infrastructure, finance, market, and resources (Osterwalder, et.al. 2011). In order to establish a successful business it is important to develop an effective business model, so this business model provides all the necessary information about the business of vegan milk. Key Partners In order to run a successful business strong relationship with key partners is necessary. For the business of vegan milk key partners will be key suppliers who will supply the raw material to produce plant milk in a large scale. Alliance with key suppliers is necessary to ensure the availability and quality of raw material so the company Vegan Milk.CO will develop alliances with key suppliers. Vegan Milk.CO will purchase its most basic raw material i.e. plant seeds from which the company will start the production of Vegan Milk. In the introductory face the company will launch Vegan Milk in only one flavour that is similar to conventional milk. To procure raw material like essential seeds and plants the company will make strategic alliances with UK’s best farmers and will purchase its raw materials from them. Along with strategic alliances from farmers the company will also make short-term contracts with few international suppliers for its raw material. Packaging is also very important for products especially nutritional products so for packaging purpose the company will make contracts with packaging express.co, produce packaging.co, pack right.co, and Tetra pack UK.CO. The company Vegan Milk.CO will produce and supply Vegan milk in the packs of half litre and one litre. To effectively run the business and to develop sustainable position in the market it is necessary to make a strong supply chain and for that purpose the company Vegan Milk.CO will make every possible effort. The first ring of a strong supply chain is the suppliers and the company will make strong relationship with its suppliers (Osterwalder, et.al. 2011). Key Activities Key activities of any business are those activities which are necessary for its operations. The key activities of Vegan Milk.CO are good relationship with suppliers, procurement of raw material, extraction of milk from plants, milk processing, packaging, distribution, marketing, and quality and time management. Contracts with Farmers: the first and foremost important key activity of this business is to find out the best farmers of UK who can provide high qualitative raw material in right price. The company will make long term contracts with those farmers who will assure the quality, average price, and availability of raw materials. Procurement of Raw Material: the next important key activity of this business is the procurement of raw material. For that purpose the company will hire specialized people so that they will purchase qualitative raw material. In order to communicate with different suppliers and for order and payment invoices purpose the company will employ modern technological software so that it would create effective communication system. Milk Extraction: it is necessary to effectively and efficiently extract milk from plants. For that purpose the company will install different milk extraction machines in its production unit and will hire experienced people in its production department. To run these machines the company will hire employees and will provide training to them. For attaining the efficiency the company will utilize all its resources effectively.   Milk Processing: after extraction the milk will be processed and additional nutrients will be add to the milk. The company will pasteurize the milk in order to save it from bacteria and other food spoiling microbes. Milk processing is essential to increase its life and to maintain its freshness. The milk will be useable for drinking after two months from its manufacturing date. Packaging: packaging is as essential as milk processing because it keeps the product fresh and safe. The vegan milk will be available in UK market in tetra packs of half kg and one kg. The reason to use tetra pack is to keep the milk fresh and bacteria free. In today’s world everyone is very conscious about their health and want to consume fresh and organic products and right packaging adds value to keep the product safe. The company will use attractive colourful packaging to attract the customers and will print calorie chart on milk packs. Distribution: effective distribution is an important part of an effective supply chain and in today’s world companies are not competing with each other in fact their whole supply chains are competing (Osterwalder, et.al. 2011). Vegan Milk.CO knows the important of distribution in its supply chain and will use effective distribution channels. For distribution the company will make contracts with reliable distributors of United Kingdom. For the future the company is planning to buy its own transportation trucks and to expand its business by distributing its own products. Quality and Time Management: with the passage of time customers are becoming more quality conscious and they want to buy qualitative products and the right time (Key, Appleby, & Rosell, 2006). Quality means satisfy customer demand by proving them their desired product at right time and right place. In order to maintain quality standards Vegan Milk.CO will take ISO certification and will use quality management techniques like total quality management and six sigma technique. Time management is also very necessary especially in food items so the company is aiming to effectively utilize time and improve lead time. Marketing: marketing is one of those important activities that help business to sell its products. Marketing is essential because it provides information about products to the customers. Without effective marketing no business can run successfully. Vegan Milk.CO will use different marketing channels to communicate with customers. The company will use social media platforms, digital media and print media for the promotion of its products. The company is planning to publish a health magazine and will print ads of Vegan Milk in magazines and in newspapers. Aggressive promotion efforts will be one of the major factors for Vegan Milk’s success. Vegan Milk.CO will use effective promotion strategy. First the company will reach to its customers through bill boards, newspapers, flyers, television, internet, and magazines. Second, the company will play the ads in the yellow pages of newspapers. Third, the company will advertise in trade journals and selected business read by potential customers. Vegan Milk is not only considered as the substitute for the conventional milk is it full of nutrition and healthy for all age groups. Value Propositions Value proposition means value which the business provides to its customers. Vegan Milk.co will launch plant/vegan milk in the market so; the company will provide a substitute product of plant milk to those who have lactose intolerance. This product will be full of nutrition with the taste similar to milk and will solve the problem of lactose intolerant people. Some people don’t want to consume milk and other dairy products in order to follow a vegan diet and some people don’t take milk in order to avoid hormones and antibiotics which are presents in conventional milk (Waldmann, et.al. 2003). The company Vegan Milk.CO will provide a substitute product to all those people who don’t want to consume conventional milk. The most important value proposition to the customers is to qualitative products and the company is very conscious towards the quality so it will provide highly qualitative vegan milk to its customers. The company will ensure quality at each step from procurement of raw material to the delivery of products to its final consumers. Different quality measures adopted by the company will provide competitive and sustainable advantage to the company. The company will launch Vegan milk in the flavour similar to conventional milk but with more nutrients and without lactose. Rice milk and Flaxseed milk are also substitutes of conventional milk but they are weird in taste as well as their texture is light. So the introduction of a substitute product with similar taste and texture of conventional milk is a great idea, and people who are worried because of their health will get benefits from this product. The greatest value that the company will provide to its customers is in the form of healthy and nutritious product. People want to live a healthy life and for that purpose want to consume qualitative and tasty food, but due to health issues they have to eat or consume products that are not good in taste so the company Vegan Milk.CO has decided to provide healthy and delicious substitute of conventional milk. With the passage of time people become aware that dairy products are not good for health and according to the study in American Journal of Clinical Nutrition dairy products may increase the risk of prostate cancer (Craig, 2009). So Vegan Milk.CO will create a value to its customers by providing them healthy nutritious vegan milk. The company will ensure the continuous supply of Vegan milk and will facilitate its customers by distributing the product to the retail stores. The price of the product will be affordable and people can enjoy the milk daily. Nutritional information-per 100 ml of Vegan Milk Energy 62 kcal Carbohydrates 7.9g Protein 3.5g Fat 1g Of which saturated 0.30g Of which mono unsaturated 0.3g Fibre 1.5g Calcium 135mg Vitamin D 0.95 µg Vitamin A 130 µg Customers can get 62 kcal of energy from the serving of 100ml of vegan milk. The milk is delicious in taste and healthy in nature so it is a great substitute of milk for those who are health conscious and have lactose intolerance. Customer Relationship Effective relationship with customers is very important for any successful business because without effective customer relationship management no business can survive in a long run. By developing strong relationship a business can earn more profit and can give tough competition to its competitors. Customer relationship means the way your company deals with its potential clients. Vegan Milk.CO will develop strong relationship with its clients and will develop customer feedback system so that it can connect with them and will solve their problems. The company will use social media platform to connect and communicate with public. Social media is one of the fastest and easiest ways to be in touch with public and to communicate with then and the company will effectively use this source of communication. Customer Segments Customer segment means group of potential customers of any business. It is true that no business can serve all so business organizations select a specific segment of customers and create value for that particular segment. The segment which Vegan Milk.CO aims to serves consists of those people who have lactose intolerance and those who want a healthy life style, so it is clear that the potential customers of the company are health conscious people. In US more and more people are switching dairy products with vegan milk due to its health benefits. Vegan milk is healthy and low in calories so it is a best alternative for people who are diet conscious and want to intake nutritious milk. The company Vegan Milk.CO aims to serves middle class to upper class consumers. The price of the Vegan Milk is affordable to middle class people and they will easily get the benefits of Vegan Milk. The company aims to serve all the people who are health conscious and are allergic to milk. The company knows how to deliver qualitative, affordable, healthy, and delicious substitute of cow milk to its valuable customers. Key Resources The key resources that will create value for the company include raw material, effective distribution channel, competent human resource, experienced management, customer focus strategies, and strong relationship with customers (Meertens, et.al. 2012). The company knows how to better utilize its key resources and to create value for customers and for itself. The most important key resource of the business is raw material from which the milk will be extracted. Vegan Milk.CO is very conscious about the quality of raw material and will only make alliances with those farmers who possess ISO quality standards certification. Timely delivery of products is necessary in fast moving consumer goods so the company will use effective distribution channels for the distribution of its products across UK. The company also aims to expand geographically in the future by selling its products across different countries. With the help of skilled labour force and competent management the business can get success and the Vegan Milk.CO will hire experienced and competent human resources. The company will conduct different training programs for its employees and will hire competent management. The most important resource of any business is its customers who generate value for the business. The company will develop strong relationship with its customers by its customer focus strategies and plans. The mission of Vegan Milk.CO is to provide a nutritious substitute of conventional milk to its customers in the form of Vegan Milk. As mentioned earlier that customers are the most important resource of any organization so the company will not compromise to satisfy its customer’s needs and demands. After getting feedback from customers the company will introduce new flavours of Vegan Milk in the future. Channels The company will make contracts with distributors who will distribute Vegan Milk to small and large retail stores. The company is also planning to distribute Vegan milk in large departmental stores like Tesco and Wal-Mart. The company will make contracts with distributors on long term basis and will. Vegan Milk.CO will take the help of social media platforms like Facebook, Twitter, and Instagram to reach its potential. The company will use both push as well as pull marketing strategies for Vegan Milk. After the launch of Vegan Milk in UK’s large retail stores the company will sale Vegan Milk in retail shops. The three most important areas of channels are distribution, communication, and sales. The effective utilization of these three areas can bring success and the company Vegan Milk.CO knows how to make effective strategies to use these three areas of channels. On the packs of Vegan Milk the help line number will be mentioned so customers can give feedback about their experience of consuming vegan milk and if they have any query of problem they can convey to the company. Cost Structure Cost structure refers to the relative proportions of variable and fixed costs that a business organization incurs (Fritscher, & Pigneur, 2010). Cost structure of Vegan Milk.CO consists of fixed cost and variable cost. Fixed cost components are wages and salaries of direct labour, research and development budget, distribution budget, insurance cost, interest expense, depreciation cost, administrative overhead, and plant or machines fixed maintenance cost. On the other hand variable cost components are cost of raw material, inventory holding cost, processing cost, utility expenses, and taxes. The company will invest 40 million pounds in whole operations and will take loan of 20 million pounds. The project cost includes cost of capital expenditure as well as working capital required for the project. The company will reduce cost my gaining efficiency with the passage of time and will generate more revenues but in the initial period of operations the major aim of the company is be to create sustainable position in the market. Revenue Stream Revenue streams is one of the most important building block of any business organization it shows how the company generates cash from its each customer segment (Meertens, et.al. 2012). The target customer of Vegan Milk.CO consists of people who have lactose intolerance and those who are health conscious. The company aims to generate sales of 50,000 units in the first year of the product launch. The pro-forma sales budget of vegan milk is mentioned below. The company has decided to sell one litre pack of Vegan milk in 12 pounds and half litre pack of Vegan milk in 6 pounds. The price of the product is market competitive and the product is better than other competitive products available in the market in terms of nutrition and value. SALES BUDGET QUARTERS 1 2 3 4 Budgeted sales (units) liter pack 3,000 5,000 8,000 10,000 Selling price per unit ×12£ × 12£ ×12£ ×12£ Total sales of liter pack 3,6000 60,000 96,000 120,000 Budgeted sales (units) half-liter pack 3,000 4,000 5,000 12000 Selling price per unit ×6£ ×6£ ×6£ ×6£ Total sales of half-liter pack 18000 24,000 30,000 72,000 Total sales (in Pound) 54.000 84,000 126,000 192,000 Competitive Analysis The major competitor of Vegan Milk in UK market is Rice Dream milk which is also made up of plants and available in market in different flavours. Rice Dream milk is the product of My Dairy-Free Dream Company. There are different flavours available like soy almond, soy vanilla, soy chocolate, and soy cappuccino. The company is operating well in the market. Since the ratio of people who are shifting towards vegan diet is increasing day by day due to health awareness and lactose intolerance and the plant milk producing companies are limited, so there is a gap in market which Vegan Milk.co will fill by its product i.e. Vegan Milk. The company will give strong competition to other plant milk producing companies because of its excellent business model, unique value proposition, customer driven strategies, nutritious milk, and affordable price. To give a strong competition to Rice Dream Milk and other plant milk producing companies it is necessary for Vegan Milk.CO to create a unique value proposition for its customers, and the company is working hard to achieve that objective. Other competitors in UK market are Alpro Rice Milk by Alpro.CO and Flax Milk by Good karma.CO. These brands of plant milk are available in market and it becomes necessary for Vegan Milk.CO to provide a substitute for lactose intolerant people better than any other competitor. Rice Dream milk is available in the UK market for last two years. The aim of the company is to provide dairy free product to its customers, currently the product is available in the market at a price of £12.72 whereas Vegan Milk.co has decided to sell Vegan Milk at the price of 12£. The price of Vegan milk is lower than Rice Dream milk but the milk is more nutritious. The major competitive advantage that the company Vegan Milk.CO will have over its biggest competitor Rice Dream.co is the availability of vegan milk in different flavours like coconut, peanut, and almond. Another advantage that the company will get is the availability of vegan milk in small retail stores. The distribution channels which the company will use are very effective and will help the company to grow. In order to get sustainable competitive advantage the company will invest money in research and development and will launch more flavours in the future. The company Rice Dream.co invest some portion of its budget in corporate social responsibilities activities like pollution reduction, green land, and waste reduction. Vegan Milk.co is also planning to help the society by engaging different corporate social responsibility acts. Few months before Rice Dream had organized a campaign that was basically for consumer awareness about the product’s benefits and about its availability in UK. Vegan Milk.co will also organize campaigns for vegan milk’s promotion but the company will use social media platforms to communicate with potential customers. Rice Dream uses its own distribution channels and will distribute the products in UK through its own delivery vehicles, whereas Vegan Milk.CO will make contracts with different distributors for the distribution of Vegan Milk throughout UK and in the future the company will also export its product in other continents. Rice Dream is available in large stores of UK like Tesco and Waitrose stores and also in Amazon.com which means people can buy the product online, but in the initial phase vegan milk will only available on retail stores. In the future vegan milk will also be available on internet. Both companies My Dairy-Free Dream.CO and Vegan Milk.CO know the importance of customers for their business so both are passionate to serve their customers in the best possible manner. Vegan Milk.CO is a new company so it has advantage to better create value for its customers and to capture more market share by the delicious flavours of vegan milk. Conclusion Business model provides information about organizational strategies, aim, values, and alignment of different strategies to business mission. It provides logical insights about company’s procedures and methods that the company use to develop value for its customers. Canvas business model was introduced by Alexander Osterwalder which is based on his work on business model ontology. The canvas business model is basically consisted on nine building blocks which are essential for all organizations. The canvas business model helps organizations to fine their key activities in a systematic that generate value for the business. The greatest challenge companies nowadays face is to create sustainable competitive advantage and the canvas model helps them to identify ways to attain sustainable competitive advantage. The business model presented in this project is based on canvas business model and elaborates the idea of plant or vegan milk. The business idea of plant milk producing company is very good because many people have lactose intolerance due to this they cannot digest cow milk whereas some people don’t want to consume cow milk due to their health concern. Vegan milk is a substitute of conventional milk which is low in calories and high in nutrition. The information provided in this business model regarding product, services, resources, distribution, partners, and key value activities helps in the analysis of organization’s functions that leads organization towards fulfilment of objectives and goals. Reference List Craig, W. J. Health effects of vegan diets. The American journal of clinical nutrition, 89(5), (2009), 1627S-1633S Fritscher, B., & Pigneur, Y. Supporting business model modelling: A compromise between creativity and constraints. In Task Models and Diagrams for User Interface Design. Springer Berlin Heidelberg (2010) (pp. 28-43). Koletzko, S., Niggemann, B., Arato, A., Dias, J. A., Heuschkel, R., Husby, S., ... & Vandenplas, Y. Diagnostic approach and management of cows-milk protein allergy in infants and children: ESPGHAN GI Committee practical guidelines. Journal of pediatric gastroenterology and nutrition, 55(2), (2012), 221-229 Key, T. J., Appleby, P. N., & Rosell, M. S. Health effects of vegetarian and vegan diets. Proceedings of the Nutrition Society, 65(01), (2006), 35-41. Meertens, L. O., Iacob, M. E., Nieuwenhuis, L. J., Van Sinderen, M. J., Jonkers, H., & Quartel, D. Mapping the business model canvas to ArchiMate. In Proceedings of the 27th Annual ACM Symposium on Applied Computing (2012, March) (pp. 1694-1701). Osterwalder, A. The business model ontology: A proposition in a design science approach. (2004). Osterwalder, A., Pigneur, Y., Oliveira, M. A. Y., & Ferreira, J. J. P. Business Model Generation: A handbook for visionaries, game changers and challengers. African Journal of Business Management, (2011).5(7) Swallow, D. M. Genetics of lactase persistence and lactose intolerance. Annual review of genetics, 37(1), (2003).197-219 Savaiano, D. A., Boushey, C. J., & McCabe, G. P. Lactose intolerance symptoms assessed by meta-analysis: a grain of truth that leads to exaggeration. The Journal of nutrition, 136(4), (2006).1107-1113 Waldmann, A., Koschizke, J. W., Leitzmann, C., & Hahn, A Dietary intakes and lifestyle factors of a vegan population in Germany: results from the German Vegan Study. European journal of clinical nutrition, 57(8), (2003), 947-955. Read More